Big fish eats little fish-

From NY Times editorial

Moebs Services, a research company that has conducted studies for the government as well as some banks, reported recently that banks will earn more than $38 billion this year from overdraft and bounced-check fees. Moebs also estimates that 90 percent of that amount will be paid by the poorest 10 percent of the customer base.

More "too big to fail" is socialism for the rich-

From Robert Reich (Clinton's Secretary of Labor)blog:

The insurance [govt bailouts]these "too big to fail" banks are receiving makes them more like public utilities than private firms. As such, not only is it entirely appropriate for government to review their pay but also to make sure pay is kept within strict bounds -- not $100 million, not $10 million, not $7 million, but far, far less. As long as you and I are cushioning them, their top brass should be earning just about what the top brass of any public utility earns (which, when I last looked, ranged from $100,000 to $600,000).

The big banks have a choice, of course. They could opt out of the "too big to fail" system. They could break themselves apart (or invite antitrust agencies to do the breaking for them) so they were no longer too big to fail and won't be bailed out the next time they make hugely stupid mistakes. Then they could award their executives and traders as much money as they wanted and as the market would bear -- because then they'd be part of the free market instead of wards of the state.

Currently playing: Neil Young's Live at Massey Hall

Health Care Crucible: Public or Private?

Fits over health care reform at congressional Town Halls around the country have dominated the cable news for the past week, so the Pres weighs in with a NY Times Op-Ed. Perhaps it’s his measured style, or intended to counter the “loud voices,” but it comes off too lukewarm. Once the hysterical opposition talk about “death panels” and, gasp, “socialism” (“We gotta stop this madness before we turn into Russia,” one woman stammered in frustration. It’s still the Cold War! Later the same lady admitted on some cable news show that she didn’t hear a word of what Arlen Spector said in response to her question) blows over it’s going to come down to costs. How is this thing going to be paid for? Universal coverage means increased costs. Meaning: higher premiums. Making it illegal to deny people coverage because of their medical history is going to increase costs. Meaning: higher premiums. It is extremely hard to believe that cutting wastes and inefficiencies (networking records, bundling payments for doctor care, etc), as good as these ideas might be, will cover these increases in costs. Taxing the rich might get us universal health care but it won't stop inflation in health care premiums and costs. Or let me put that more directly: based upon what evidence could we possibly believe that health insurance companies given this scenario will NOT continue to raise premiums? Backroom handshakes w/ Big Pharma? Over the last decade or so health care premiums paid by people, families, has grown three times faster than wages. The measures to keep the insurance companies accountable that Obamacare is now talking about, at the height of the debate, involve coverage issues but not, seriously, costs. Sure, I think everybody should have access to basic health care. But Obama is still pulling punches w/ the corporations, and has apparently given up on the importance of the public option, or in his words, "keeping the insurance companies honest." Come on, the profit gouging will continue without a not-for-profit public option to keep the private insurance companies, yep, honest on costs. The NY Times prints some University of Chicago economist (also something in the Washington Post)explaining why any public option (under a "fair" set of regulations)would not impact health care costs significantly. His case is not convincing. How is it all those European countries and Canada get way more "care" for the buck than we do after all? Tell me it has nothing to do w/ the fact that as public services they don't have to pay CEO and managerial supersalaries or hundreds of millions of dollars on advertising and lobbying the government? So, apparently, we're going to get universal health care and more inflationary health care preminums and costs. This is the great democratic compromise on the table at the moment. And when costs do blowup it will be blamed on Obamacare, of course. Wall Street is going to be O’s undoing, I'm just saying.

Currently playing: Best of Tom Ze

Job Losses Slow, Signaling Momentum for a Recovery?

This is one of those kinds of front page stories on the economy where the headline and reporting seem to be at odds. Editors must hope most readers won’t read much past the encouraging headline because the reporting chips away until by the end of the story you have almost the direct opposite sense from what the headline has suggested.

The first paragraph establishes that the employment report serving as the basis for the story is somehow encouraging despite that fact that businesses have not started hiring or even stopped shedding jobs.

In the second paragraph we learn the good news is that fewer jobs were lost in July(247,000)than any month in the last year. The unemployment rate actually dropped from 9.5 to 9.4 but this was because a lot of Americans have simply given up looking for work. Good news?

There is anecdotal evidence from businesses that the pressure to cut jobs is ending but several paragraphs on we register what’s lacking from the other side of this equation is that there remains no sign as to when they might start hiring again! Something like 15 million Americans have gone over six months without being able to find any kind of job. This is a 61 year-old record. Again, many more have stopped looking altogether.

There is a lot of talk about the 700 billion stimulus putting the brakes on job cuts and jumpstarting a recovery. I’m sure it hasn’t hurt. But how does this 700 billion measure up to the spending cuts at the state and city levels continuing across the country?

Currently playing: Wayne Shorter Speak No Evil

Too big to fail is socialism for the rich—

and who is and who isn’t too big to fail anyway?

Currently playing:Louis Armstrong Plays W.C. Handy

Goldman Sachs- Up, Everyone Else- Down!

During the second quarter Goldman Sachs recorded the biggest quarterly profits in the institution’s 140 year history, while unemployment, pushing 10%, reached its highest point in three decades. Isn’t the amount, the humongous dwarfing scale, of financial investment profits on Wall Street that— and this is key— do NOT CREATE JOBS on Main Street an important, crucial, if not the biggest long-run, problem with the economy?

Currently playing:Flying Saucer Attack Rural Pychadelia

Leveraging success one customer at a time

I just saw the CEO of the reconstituted GM, Mr. Fritz Henderson, on the News Hour. It was like a scene from a Christopher Guest movie: imagine a folk music record executive, from A Mighty Wind, talking about coming back from bankruptcy. “Smoking hot!” Can’t find the video but here’s a taste from another recent Fritz presentation.

Currently playing:"Can't Let Her Get Away," Michael Jackson

Unsung Heroes of the Collapse

Banker's Holiday Continues, Part 8 (or 9)--
“Four of the [Banking] industry’s top trade groups spent nearly as much on lobbying in the first three months of this year as they did in all of 2001.” Stepehen Laboton, NY Times, 6/4/09


End of school: grading, graduation, and goodbyes. Gawd, I hate goodbyes. Kids have the get-out-of-jail-free smiles plastered on their faces since Memorial Day. They don’t want to sit through lessons about racism as a justification for economic exploitation during the age of imperialism; Kipling’s “the white man’s burden,” etc. “Yeah, right, Mr. T, can we have our party now?” RIF-d (i.e., “reduction in force,” a euphemism for you no longer have a job) teachers shuffle out the door wondering what they did wrong (nothing), blaming older teachers that don’t work as hard as they do. Everyone else heads home, again, shaking their heads.

This year’s graduates, the first batch at my school I taught as 9th graders, were especially touching as they crossed the dais with their diplomas, looking simultaneously like they’d been shot out of a happy cannon and totally unsure of where the hell they were going. Politicians like to huff and puff about our failing public schools (usually as a pretext for cutting funding and implementing some punitive accountability measures), but this year’s grads are better prepared for what lies ahead than I ever was, at least as smart as my generation, and a whole lot smarter than the collective stupidity of this country’s leadership since I graduated from high school.

But those goodbyes. I freeze up tight. I fear I'll explode in tears; red face, snot, choked up, “I’ll really miss you, man!” So I really have to psych myself up to make it through w/ the right degree of stoic composure, ‘onward and upward, summer adventures, don’t forget me when you make it big, fond farewell and pip pip cheerio.’ And, still, I probably reflexively do a little avoidance. But I muddle through, hug someone too tight, gush too much after a couple beers, but I make it through another year w/ my stodgy dignity more or less intact: happy to collaborate and learn from students and colleagues and do what I can to give kids a little leg up and over on their way who knows where, to English literacy and world citizenry! The stuff of teacherly hopes. But I still hate the goodbyes.

So, at any rate, I haven’t had any time (or emotional energy) for writing for awhile but I’ve followed the news on the economy some. (I can’t help myself.) Sorry to say, if you haven’t noticed (and if you follow only TV reports you might not have), but our side is losing. Sure, the stock market is rebounding, banks credit is loosening. Unfortunately, unemployment continues to grow (pushing 10%), there’s no certain ebb to the tide of mortgage foreclosures yet, and there are more blue hairs working at Fred Meyers. But Wall Street’s confidence in its ability to continue fleecing the public is rising, so things are getting back to normal. Some catch-up.

preposterous hopes— too big to fail?

Maybe foolish but there really did appear to be an opportunity in this economic crash, because of its shocking severity (“apple pie and Chevrolet,” the latter just went bankrupt!), to see some real political-economic reform. At minimum, some basic national antitrust wakeup call to the effect that private banks and corporations “too big to fail” are a threat to democracy and nothing more than a “socialism for the rich.” If a business is too big to fail then make it public, and so politically accountable, or reduce and limit its size so that it cannot become too big to fail. To fail to make this correction makes a massive shell game mockery of our democratic system, one that people recognize (here and abroad) even if they don’t understand the complexities of the economy.

banks win, consumers lose

It’s embarrassing, really. Despite promises and rhetoric to the contrary, Obama has given in to the status quo on Wall Street. Lawmakers who have discussed the issue with the administration say the president’s senior aides concluded that a battle with Wall Street was simply not worth the cost. What aides? His guys from Wall Street, Geithner and Summers? What costs? Their friends in banking, their investments?

It’s so galling you couldn’t make this stuff up. The economy tanks, demand plummets. The government pours trillions of dollars into saving the financial sector, instead of nationalizing and reorganizing it. So out of gratitude the banks sit on the money because they don’t want to start lending until they know the full extent of the damage from the housing crash. And then at the first signs of stabilizing markets they begin raising staff salaries, again, and rates on customers (you know, to cover their costs from losses in the housing market). Meanwhile, the O Team finally gets around to some “compromised” regulatory reform proposals (being furthered by galling bank interests as I write) that, mostly, will increase the power of the Federal Reserve to police Wall Street, which is like asking Miller Brewing to police drunk driving.

The proposed regulations do nothing structurally about the size of those private profiteers too big to fail and little about the shadow banking and “off balance sheet entities” that mark the most grotesque dishonesty of the banking crisis. According to those that know better, the proposal to require some skin-in-the-game (5%, reportedly)from loan operators is laughably insufficient. No one has been more wrong in the run-up to this collapse than credit-rating agencies like Moody’s and Standard & Poor's. And, yet, not a peep about reforming these institutions. Nor a word about limiting the “brokered deposits” or “hot money” that has destroyed many regional banks.

The administration’s talk about consumer protection, see Geithner on Meet The Press, seems like token public relations. (Throw the dogs a bone, watch them scurry after it.) Curbing predatory credit card practices is welcome but small potatoes compared to losing your job or home or pension. Obama made promises about helping save people’s homes from foreclosure and then abandoned those plans to a congress full court pressed by the banks. (How, at this point, you might wonder, increduously, could the unpopular banks exert this kind of influence? I don't know but I bet it has something to do w/ money.) Consumers trying to hang-on to their homes are lost in the black hole maw of the mortgage servicing industry: a Kafkaesque labyrinth of customer service reps, a system mismanaged and overwhelmed by the demands put on it. Meanwhile, the banks squeeze another cool $13 billion in “bailout” money out of a congressional bill intended, in the President’s words, to “stand up to the Special Interests, and stand up for the American people.”

Bernie Madoff’s Wall Street

Mad greedy Bernie Madoff goes to jail for 150 years. Yes. It’s like dunking some asshole at a county fair. But let’s remember Madoff was NOT some rogue operator or extreme aberration on Wall Street. He was an insider’s-insider, a respected confident to the head of the Securities Exchange Commission. Madoff helped set the rules. For goodness sakes, if insider expertise was what’s needed to save the economy than Bernie Madoff would have made a better (or at least more honest) choice to join the O-team than Geithner and/or Summers. And it’s hard to imagine, grand larceny thief that he is, how he could have advised any more favorable terms for Wall Street than those two supposedly paragons of business propriety.

Obama explains the collapse thusly: "A culture of irresponsibility took root from Wall Street to Washington to Main Street. And a regulatory system basically crafted in the wake of a 20th century economic crisis--the Great Depression--was overwhelmed by the speed, scope and sophistication of a 21st century global economy."

And William Greider responds: “That is not what happened, to put it charitably. Unlike some other presidents, Obama is much too intelligent not to know this. The regulatory system was not overwhelmed by historic forces. It was systematically gutted and dismantled by the government in Washington at the behest of the banking interests.”

Banking interests from which Madoff was not an exception but a leading light. They believed in the wonder of securitization, investments without risk, based on inscrutable formulas and off the books trading. It’s guys playing with other people’s money, with said people totally oblivious until it is too late. So that’s their own damn fault, say P.T. Barnum capitalists. But is playing suckers really the kind of “business model” we need or want? I wouldn’t think so but, to this point, the O Team has done everything they can to mask the problem and jumpstart the banker’s game of bubbles and busts. More casino capitalism for everybody!

In Rolling Stone, Matt Taibbi (The Great American Bubble Machine), already identifies the new bubble sector as the carbon cap-and-trade still being ironed out in congress.

apologies and promises

Obama apologists will argue he’s too busy with health care or creating this carbon trading system to take on the banks. But if he’s doing this alone then we’re lost. And if he cannot put some people on the job to make sure the right thing gets done in congress in support of new bank rules and forestalling more home foreclosures then he does not possess the leadership we need. Come on, all the talk about standing up for Main Street, while turning a blind eye to cutthroat Wall Street deal-making, after already giving these guys the farm and then some, is contemptible.

Reagan Did It

Of course, Obama did not make the deregulatory mess our financial system is in but he’s enmeshed in a wonky conservative account of the crisis. It was Alan Greenspan, as Fed Chair, with Ben Bernanke’s help, who, back in the High Tech bubble recession of ’01-’02, reduced interests rates too much, setting the stage for the housing bubble. Or the one I heard the other day, the crash was caused by government over-reaction to the collapse of Bear Stearns and Lehman Brothers in September. (Apparently, the trillions the public have put into the financial system has been necessary only because the government started a panic!) These aren’t credible explanations for the scale and systemic reach of this economic downturn, but they support the status quo economic policies coming out of the Wall Street-Washington axis.

So where did this whole mess really start? Krugman nails it on the Garn-St Germain Depository Institutions Act, of 1982. This is some Reagan supported legislation that deregulated standards on debt-to-asset ratios and led directly to the Savings & Loan collapse of the late-80s. And, most importantly, it inaugurated a “free market” revolution of deregulation and privatization and tax cuts for the rich and a general drift towards levels of inequality not seen since the Gilded Age. The Reagan Revolution. And it ended as a credible economic model, even if some haven’t got the memo yet, in the crash last fall.

More Chapters

As an epic novel the crisis has entered one of those long, digressive passages in Moby Dick. Emerging are the stories of forgotten heroes like Brooksley Born and Sheila Bair and Elizabeth Warren (pictured above). I don’t know what to make yet of the preponderance of women fighting the good fight here. I hope there are more of them to step up, though.

community services and the free market religion

Locally, it would seem the free market religion still holds sway. Tax revenues are down so the state budget was slashed. You might expect some politicians to question a tax base structure that puts such basic community services as police, health care, and education at the mercy of the ups and downs of the market but I haven’t heard a word.

It seems like the same old game. Russel Investments, for example, is this huge investment services firm-- homebased, or up to now, in Tacoma—who manages $136 billion in assets from 147 countries. Because Russel has been talking about moving, local congressman, Norm Dicks, has pledged more than $148 billion to keep them in Tacoma. (And Gov. Gregoire will chip in another $700,000.) You have to wonder how the math here adds up to benefit the local community? What it appears to be is the same old state and municipal groveling to win favor with big corporations in hopes for some growth trickle down.

Which brings me back to where I started following this crazy mess last summer. I’ve supported government spending because I hate to see people lose their jobs or homes or pensions. I watched people lose jobs this spring and I felt bad for them. I do not know what I’d do if in their place; I’d really feel lost. Or if my parents lost their pensions, it’d be very hard on them. These are hardships I would not wish on anybody. But these wishes beg the question as to how much longer this growth economy, that I hope the government can revive, can be sustained?

People have been raising this question for a long time and been dismissed as hippy-dippy Chicken Littles for a long time as well but the signs of stress on climate and our food and water supply have multiplied in the last decade more than anyone expected. It is becoming increasingly apparent to all that we cannot continue to consume resources as we have indefinitely, and the rate of per capita consumption in our country cannot be extended to the billions in China and India without dire consequences for the planet.

The grandeur of “free market” theory is based on the delusion of a perpetual motion machine. It fails to account for the finite energy sources it needs as inputs or the impact of the wastes it generates as outputs. From a broad view what we’re experiencing economically are pressures, breakdowns caused by debt (investments in the future) growing faster than our ability to produce real wealth. We’re pushing up against Malthusian limits (the days of cheap energy are numbered) and need another green revolution to stretch those limits. But at the moment it’s hard to imagine how this need can be reconciled with an economic growth model based on ever increasing demand and consumption.

muddling through

Back in the day my friend Pam and I used to go for these long walks after work. Ranting, laughing, shaking our heads at the office drama, upside-down politics, the impossibly Dilbertian people that filled our work lives. We developed a ritual in these conversations where at some point one of us would, sigh, and exclaim as to the wonder that the world keeps spinning, that people don’t stop in the street and go stark raving mad from the upside down craziness of it all. Something like Peter Finch in Network, I suppose we imagined. We settled on this little ritual as an ironic punctuation mark on our ravings: because at the end of the day what always astonished us most was that, despite all the dysfunctional drama of our workplace, our programs and organization always seemed to muddle through. And that seems true of the world, too: it seems to muddle through just like us. You have to wonder, though, how long this can last.

Currently playing:"Tell Me," The Rolling Stones

Can Wall Street Play By The Rules?

About time, sheesh. Now I await some insider analysis as to whether this is the real deal or some cover justification for more bailout money. We'll see.

Obama Proposes a First Overhaul of Finance Rules

Currently playing: "My Heart Is Open," Keith Urban

Hard Times

She keeps the bottle that he sent her for, to this hour; and she will believe in his affection to the last moment of her life, said Mr Gradgrind.

It seems to present two things to a person, don't it, squire? said Mr Sleary, musing as he looked down into the depths of his brandy and water: One, that there is a love in the world, not all self-interest after all, but something very different; the other, that it has a way of its own of calculating or not calculating, which somehow
or another is at least as hard to give a name to, as the way of the [faithful] dog!

Squire, take heart, first and last, don't be cross with us poor vagabonds. People must be amused. They can't be always a learning, nor yet they can't be always a working, they ain't made for it. You must have us, Squire. Do the wise thing and the kind thing too, and make the best of us; not the worst.

It is a dangerous thing to see anything in the sphere of a vain
blusterer, before the vain blusterer sees it himself.

By Charles Dickens

Currently playing:"I Remember Every Kiss," Jens Lekman

Grading O's First 100 Days

The grading period ended last Wednesday. Grades are due. Another crunch time for teachers. After 100 days, somewhere between a quarter and semester in school time, and admittedly not very much time at all in the grindingly slow speed of democracy in our nation’s capitol, Obama is like the student who you think is doing fantastic. A standout member of daily class. Regularly engaged in group discussions, he always has clever, thoughtful things to say. In collaborative activities he assumes leadership responsibilities, suggesting creative solutions to problems and pushing the group work forward. But then when grading, looking back over records of assigned work (fulfilled campaign promises?), you note they have not turned in much and what they have turned in were the simplest tasks requiring the least effort.

Establishing conservative plans to close Guantanomo and exit Iraq, getting a stimulus bill passed (that is too small), opening relations with Cuba, and releasing some memos that authorized torture during the Bush years. Welcome deeds but nothing very substantial.

Worse yet is when you pause to consider more closely the new Pres’s comments on, say, education, a subject close to my home. O’s stimulus bill includes, reportedly, the most money for education ever in an annual federal budget. One of its stated goals is to reduce job losses in education from the economic crisis. But the losses have already started. Cuts locally are being announced weekly without any word from the feds. Another round of cuts in the school district where I work is scheduled for May 15th.

O has repeated an intention that the stimulus money contribute to reforming our troubled public school system. How? Charter schools and merit-pay pop up in his spare remarks like talismans. Without clarifying details these aren’t just bad ideas but, frankly, old hat and dangerously stupid. Charter schools within the public school system, as alternatives programs (e.g., smaller schools, lower teacher-student ratios, more flexible schedules, etc) to the comprehensive high school, are a fine idea. Both comprehensive high schools and alternative programs have their place and should compliment each other in meeting the varied needs of students passing through the ruthless popularity contest and emotional minefield that is teendom. Charter schools as an end-run around teacher unions, however, by profiteering corporations seeking access to public education funding only undermines public education. (O, BTW, sends his own kids to private schools.) Early reports suggest O’s Education Secretary Arne Duncan might be no better than Bush’s Rod Paige. It’s no small irony that in these times of economic crisis public education is going to be saved, again, by corporate conceits.

Merit pay is an even bigger can of worms. Linking teaching pay to student economics—the lower the student economic demographic the higher the pay— makes some sense: certainly, in my experience, the lower the economic demographic, for a host of reasons, the greater the learning challenges and so the more difficult the teaching work. But so far O’s allusions link teacher merit-pay to standardized test scores. This would be idiotic on multiple fronts: 1) Foremost, the pressure to game the system (don’t forget Paige’s so-called “Texas Miracle”); 2) The contested reliability of standardized testing, in general; 3) The impracticality of linking annual test scores from year-to-year to a teacher without looping teacher schedules (which in the short run will weaken instruction); and 4) The tendency to reinforce the already existing tracking system in most schools that matches the more experienced teachers with the easiest to serve students and young inexperienced teachers with the hardest to serve students. I am really not a standardized test basher; such tests have their place. But at my high school the WASL takes up too much time and over time marginalizes subjects not on the test. Moreover, I’ve been to enough meetings on the subject to know the WASL has wrecked even more havoc at the elementary level. I think standardized tests should be part of a graduation portfolio (with course requirements, GPA, community service, etc), not the high stakes be-all-end-all of graduation. At any rate, tying “merit” pay to test scores, really, just continues No Child Left Behind’s punitive model of school reform and accountability. Neither of these— charter schools or merit pay— are new ideas at all. They are parcel to the privatizing, free market stratagem that is crashing down around us as I write.

At this point, perhaps inaction is the best that can be said of Obama’s education policies. His banking plan, by contrast (and still subject to change we can only hope), is already out there. It would be hard to imagine (although we might see even more over the next few years!) more concrete refuting evidence of the Reagan Revolution’s supply side, deregulatory, privatizing, free market bullshit than the current debacle on Wall Street. But rather than exposing the-- literal-- bankruptcy of this economic model, O seems bent on rallying support for necessary reforms talking the talk while at the same time spending trillions of taxpayer dollars on helping giant banks and corporations continue to cover up their gargantuan boondoggle. Bailing out the banks is crony capitalism; bailing out the auto industry, after its conduct the last 30 years, without the most heavy-handed mandates requiring a green restructuring is just plain embarrassing.

Worst, this government coddling has the bizarre effect of keeping alive right wing boilerplate about the perils of big government and socialism and entitlements when in the current context these canards should appear as merely absurd. Government should be big enough to enforce the rules, takeover, and break-up, if necessary, businesses that have become too big to fail (what could be more anti-free market than this notion of businesses too big to fail?). It should be socialist enough to ensure all citizens have the opportunity to share in our national prosperity and are protected from predatory business practices. And, yes, the citizens of this government are entitled to job opportunities, safe food and water, good health care and education, and a fair legal system. These entitlements are the very reason for the government’s existence. Entitlements of the sort (capital gains tax rates on hedge fund managers, for instance) that have generated the widest wealth inequality gap since the 1920s, and the right fiercely defends, are the ones that gotta go.

The risk here, for Obama, trying to maintain popular support while slathering more butter on corporate bread, is NOT small. Bailing out the banks to the tune of hundreds of billions, if not trillions, of dollars risks running the congressional and public wells dry before it’s time to draw support for the reforms necessary to reestablish a regulatory structure that rewards hard work and honesty and rebuilds a green based manufacturing economy that can support a living-wage working class. It’s a risk that is wrongheaded at best. Some, I know, say taking on Wall Street would be political suicide. I don’t believe this and, if not now, then when? And if not ever than things are as bad as some say.

Oh yes, this is what any leftie worth their salt would have said was inevitable given the Clinton team (including Wall Street insiders) O has teamed with in the White House. But I’m not ready to give up on Obama. If we get out of this presidency with a reasonable semblance of affordable universal health care and carbon limits factored into the economy he would be the best president since before my time. And, perhaps I’m grasping at straws, but I see something significant in the video above when Summers gives Geithner a look in the background just as Obama says that when banks play chicken with the government on bailouts he sides with workers and consumers. I still think that with the right leverage O might take a stand and provide the leadership necessary to turn his words on the economy into deeds. Not just because I think O has more to offer in terms of leadership than Clinton did but because in the world today, the pieces are there, financial collapse, threadbare infrastructure and safety net, looming environmental crisis, worldwide pressures from the have-nots, and the time is right for a paradigm shift. Messy, lurching, full of denials, it feels like we’re already in one now.

Like much of America, I’m still charmed by Obama like no President before. I’m still holding out hope that O is the man to lead us out of this wilderness. (And if I’m wrong I had hope for awhile and let it animate my actions.) For now, I recommend President Obama come in after school to catch up on his homework and get some extra tutoring support. Good luck.

Grade: C-

Currently playing: Robyn "Don't Stop The Music"

MERSY MERSY ME

Another one of those peculiar subplots that keep popping up in the economic crisis.

As early as last fall I recall talk ab homeowners who were facing foreclosure but could not locate and talk to a bank or mortgage company or business entity of any kind holding their loan. They would try to talk to the organization to whom they sent their monthly mortgage payments but they were not the lender, and most bizarrely, could never tell the desperate homeowner who the lender was.

Part of this story, it turns out, involves a small company called MERS, Mortgage Electronic Registration Systems. This small entity, only 44 employees, owned by big boys like Citigroup and Wells Fargo, holds 60 million mortgages on American homes, and has reportedly saved banks a billion dollars over the last decade by creating electronic records that have dramatically reduced the need for loan paperwork. That all sounds good but the screwy part is that MERS operates under an agreement of confidentiality w/in the mortgage backed securities industry. So, frequently, MERS has initiated foreclosure proceedings but won't divulge to borrowers the lenders they are foreclosing for.

On the face of it, something like MERS seems to be Obama’s favorite pet project for modernizing the health care system. Perhaps this story should give us pause. Securitization should not be such a problem in health care. But it’s already apparent that health care profiteers are going to fight tooth and nail to sabotage any public alternative to the HMOs. I wouldn’t put it past them to game any electronic records system for their ends.

At any rate, MERS is just another layer of confusion for stressed borrowers trying to hold onto their homes. Another layer is the 3,000 “servicing” firms that file mortgage loan records with MERS. These are the people you send your mortgage loan payments to, but they are not your lender either. If you talk to them, apparently, they will almost always claim that “investor guidelines” preclude the possibility of renegotiating a mortgage loan.

So, in the end, there is no longer a lender, just a borrower, a home loan, and some investors, who do not want to be identified, but who want to get paid.

Tracking Loans Through a Firm That Holds Millions

Currently playing:OMC "How Bizarre"

Tea Party for Kooks, Demogogues, and Right Wingers

I’m almost relieved to learn the Tax Day Tea Parties were organized by Fox News. Watching reports, listening to people’s complaints, checking out the anti- government spending signs, I'd hate to think this was a honest-to-goodness grassroots movement. But if the O Team’s bank plan doesn’t work this Astroturf happening might still grow organically into something more. (Even if it makes even less sense than O’s bank plan!) Obama is already lowering taxes for 95% of Americans, or so he’s said so upteen times, so the anti-tax angle makes no sense. And government spending and deficits, right now anyway, are NOT our problem. Sure, what the government is spending money on— bank bailouts instead of more stimulus (that creates jobs, redirects the economy to green manufacturing, cuts corporate profits out of health care costs, etc)— that would be worth raising a ruckus about but I didn’t see a sign or here a peep ab that. There is a crackpot conservatism afoot that behaves like the housewife continuing to make the bed and dust the day after Armageddon. Karl Rove, in the Wall Street Journal, suggested the other day that Teabaggers go back to Reagan basics, getting the word out about the value of tax cuts and lowering government spending to stimulate the economy. Uh, the jig is up on the supply side cant, guys. First, right, this isn’t the time to be raising taxes, but lowering government spending when consumers and businesses aren’t spending is just plain stupid. And, in general, smaller government, or stripping the government of its ability to officiate what bankers do with other people’s money, more specifically— the Reagan Revolution— is a big part of what brought about the current catastrophe. If, like me, you find your blood boils at the idiocy of this stuff, check the Robert Reich link below for the cool reasoning you need for family and that guy at the coffee shop (or the cute chick who takes pride in reading cue cards).

A Short Citizens Guide to Kooks, Demagogues, and Right-Wingers On Tax Day

Oil Giants Party On

You know all those ads on TV in the past few months peddling the notion that the oil companies, Shell, BP, Chevron, etc. are way committed to developing a greener, more sustainable energy future for us all? From a piece in the NY Times today called, “Oil Giants Loath to Follow Obama’s Green Lead”:

In the last 15 years, the top five oil companies have spent around $5 billion to develop sources of renewable energy, according to Michael Eckhart, president of the American Council on Renewable Energy, an industry trade group. This represents only 10 percent of the roughly $50 billion funneled into the clean-energy sector by venture capital funds and corporate investors during that period, he said.

Until businesses are charged (yup, that means taxed!) for the carbon dioxide emissions they generate there is little incentive for them to diversify. The “free market” is a free-for-all that leaves a mess for others to clean up. For the oil giants, it’s like they get all the door receipts for puttin’ on a big party but don’t have to pay for any of the clean up. There is still way too much profit to be made from oil to waste their time and money on anything else, whatever the consequences to the planet.

Ending Banker's Holiday: Greed and Stupidity

In a column last week, “Greed and Stupidity,” NY Times columnist David Brooks outlines the development of two narratives to the economic crisis. One, called the greed narrative, locates the crisis in the overreach of an investment banking Wall Street oligarchy elite, growing from 16% to 40% of corporate profits betw the ’80s and this decade, and extending its power into government. Brooks cites Simon Johnson as chief explicator of this narrative. The second, called the stupidity narrative, suggests the collapse was caused by an over-reliance on the diversifying trick of securitization (bundling and reselling loan assets) and inflexible mathematical models that ignore inevitability of historical shocks and the unexpected tendency of the internet to accentuate runs. Elaboration of this position is provided by Jerry Z. Muller from right-wing think-tank the American Enterprise Institute. The odd thing ab this supposed narrative split is that if you’re even casually familiar w/ the literature tracking the crisis you’ll note that the stupidity narrative is already part of the greed narrative. Brooks even admits that the reform measures for the financial markets proposed by both narratives are more or less the same, with one important exception. The greed narrative describes an insider, collusive, dysfunctional relationship betw Wall Street and Washington (Geintner, Summers, Bernanke, etc). To effectively recover from the current mess, Johnson argues that it is essential to sever the backroom ties betw Wall Street and Washington, nationalize and breakup and reorganize the banking system so that banks can no longer be too big to fail. Meaning, at least temporarily, a bigger government role. This is anathema to Brooks and conservatives raised on 25 years of Reagan Revolution free market BS, who, at this point, sound like flat-earthers. Even if we got into this crisis b/c of arrogant Wall Streeters who didn’t know what they were doing it’s those same people now in Washington serving up the weak sauce concerning the bonuses and sheisty accounting rules and black hole bailout plans. Brooks would have us believe that changing a few rules and recapitalizing (meaning: more taxpayer bailouts) will do the job. Even if Wall Street hubris has got us into this mess we should still fear even more Washington hubris, argues Brooks. All of which just seems like fodder to extend the dithering by the O Team and stem the tide of calls for breaking up the Wall Street lock on Washington. Meanwhile, job news is increasingly dreary; 663,000 jobs lost in March. Unemployment has reached 8.5%; the underemployed (that includes people w/ part-time jobs who’d rather be working full-time) is over 15%. News from the Washington state proposes huge cuts in public education. Everyone at work is bracing for layoff notices in May.

Ending Banker's Holiday: Part Six

Totally unfuckingbelievable, really. It’s coming out more every day that over the last ten years arcane financial regulations have been bent, mutilated, or abandoned for the sake of “free market” interests in the investment banking industry. (To what end, we now know!) But now, after all the revelations of the last six months?! Yesterday the Financial Accounting Standards Board— Wall Street retirees and cronies, no doubt— changed a mark-to-market rule so that banks could now determine the value of their assets on their financial statements. The mark-to-market rule required that assets be valued at the price they are worth on the open market— in other words, what people would pay for them. But banks, upset that their assets are being undervalued by the current down market, have won the right to value their own assets according to what they believe they would be worth in more “normal” market times. Gawd, banks, reportedly, already have numerous ways in which to keeps assets and debts off their balance sheets altogether (for what good reasons I do not know) but now they need more ways to make up their own numbers?! This at a time when it is generally recognized (if poorly understood) that the banks were taking wildly leveraged risks, stretching their capital to debt ratios (that’s how much real money they keep ar in case some of their investments/debts go bad) way beyond sound financial practices. And this measure, of course, will only make it more difficult to hold bank risk-taking accountable. ‘Don’t worry,’ says Mr. Banker, ‘we’re capitalized w/ all these valuable assets over here’ (read: that nobody else wants right now but, hey, if we ever really need them to cover our debts taxpayers will pay our prices for them!). See today’s report in the NY Times. Note the subdued yet strained tone, especially in the quotes. Pay attention to it: it means we’ve been screwed again, folks.

(Banks Get New Leeway In Valuing Their Assets)

End Banker's Holiday: Part Five

Like a wreck on the highway, I can’t look away. The budget in public education always involves minor cuts and the threats of bigger cuts but this was the most tense budget year since I started teaching. By now everyone knows someone who has been laid off or someone who had to keep working and put off retirement. Shanty towns are popping up, Seattle has their own Nicholsville, named after our reputably heartless mayor. There’s not much humor to squeeze out of this crisis. It makes me nervous, edgy. But there is a Pynchonesque novel of names like Glass Steagall and securitization and Black Scholes and credit default swaps and Brookley Born and derivatives and Ayn Rand and subprime mortgages all swirly w/ simple dreams and fathomless gall. Three early chapters follow. If you haven’t already, check them out.

The End, By Michael Lewis


The Reckoning, By Peter S. Goodman


The Quiet Coup, By Simon Johnson

Ending Banker's Holiday: Part Four (It's Satan!)

I was surprised when I looked up the definition of a “bonus” on Princeton’s wordnet: “An additional payment (or other remuneration) to employees as means of increasing output." I always thought a bonus was a reward for increased output. Carl Crawford earns a million dollar bonus if he hits 25 homeruns and knocks in 100 runs this year. The bonus comes after the fact of the increased output. It’s based on performance. But Princeton’s definition seems to suggest you could write a “bonus” into an employee’s contract as a means to inspire them, in the hopes that the bonus will increase their output, or at least keep them employed.

This is what people don't understand about the 165 million dollars in bonuses paid out with tax payer money by the failing insurance giant AIG. As we learn today from CEO Edward Liddy, turns out there are “performance” bonuses and “retention” bonuses, the latter making up the biggest share of the AIG bonus pie, according to Liddy. Only problem w/ this account is that on it heels reports came out that many of the bonuses actually went to employees no longer working for the firm. So, there must be “severance” bonuses, too.

To most people it seems unconscionable that a business on the verge of bankruptcy since last summer, kept alive so far by 170 billion dollars of tax payer money, would be paying its employees anything beyond their basic salaries at all. What sort of output could warrant a bonus when a business is busy bankrupting the world economy!? But those people, the rising bubble of “populist” anger, don't understand. (There is something about these unbelievably unscrupulous circumstances that make the use of this term “populist” terribly condescending, as if to suggest that if public anger were not mere mob sentiment people might understand the legit purpose of these bonsuses to the the world of expert finance.)You give million dollar bonuses to keep people who screwed up your business so that they might fix it? You know, who better than the crook to suss the criminal mind?! So much for the efficiencies of private enterprise.

We have millions of people losing their jobs, losing their homes, and we’re giving economy-busting gamblers bonuses? What’s next, awards to companies whom lay off the most workers? bailouts to banks whom foreclose on the most homes? (Oops, we’re already doing this!) This is another one of those occasions where Obama’s cool hand (word awhile back had it O was beyond satire but his saunter and “be cool” demeanor begs for an SNL skit in times like these) is NOT up to the task. Talking ab a culture of greed and returning balance to the distribution of our economic spoils is fine and dandy on the stump. But this is a time for kicking ass and taking names.

It’s been argued that nationalizing zombie banks deemed too large to fail is un-American but when recipients of government support aren’t pulling in the same direction(obliviously stuffing their pockets, in fact) then bailouts are stupid or all too American. All too in favor of an American oligarchy elite, that is. Such bonuses on the public purse are unacceptable and should not be tolerated, obviously. If AIG would have had to file bankruptcy last fall instead of being bailed out by taxpayers, surely, no one would be getting any “bonuses” before debts were paid. Which means NEVER getting bonuses b/c if they could pay all their debts then they wouldn’t be bankrupt.

But righteous indignation won’t fix the problem, won’t prevent a collapse of this magnitude from happening again. Nor will the Obama Team’s vague generalities, I’m afraid. It’s as if the O Team has been instructed not to utter the words “derivatives” or “credit default swaps” or “hedge funds” in public lest they be asked to commit to rules that would fix the monstrous abuses wrought by these financial products. O talks a good game. But, again, there is a condescending disconnect emerging between his condemnations of greedy gamblers on Wall Street and a strained silence about any specifics that might curtail the public consequences of their conduct. What sense does it make to stimulate new investment b/f establishing new rules for investment? I mean, we want a recovery (more jobs) but not one based on another bubble bound to eventually collapse w/ such devastatng effects, right? Obama preaches patience but patience is no substitute for a concrete regulatory reform plan. And they’ve already announced they won’t even have such a plan ready for the G-20 Global Economic Summit that convenes this Friday in England, much to the chagrin of many of the other attending nations.

So the dithering continues. It’s as if the Obama Team still hoped to paper over this problem on Wall Street, wait on a recovery, and set the stage for the next bubble. Counting on the chicken-littles in the press and public to be proven wrong again. So the upswing in the stock markets last week spurred by more conciliatory utterances from Bernanke and Geigthner (promising to allow more off balance sheet accounting, most significantly) is a step in the right direction. Once an investment and job creation upswing gets going again people (populist sentiment) will forget ab regulatory reform, one would assume this reasoning goes. Meanwhile, Nightline is taping a show in Ballard on the existence of Satan in the excesses of Wall Street. See, when the public dithers in mystifying BS explanations for what's happening it’s mounting mob anger, when our Celebrity Pres dithers it’s cool leadership. But, really, condescending or pandering to the people isn't the leadership we need. I still want to believe but....

Ending Banker's Holiday: Part Three (A Rant!)

This morning on This Week this guy, George Stephanopoulos, asked those sitting ar a table, George Will, Paul Krugman, and economist Nouriel Roubini (aka Dr Doom b/c he prophesied the housing crisis 15 minutes b/f it happened)(and some lady from Business Week I don’t know), if there ought to be established something like the 9/11 Commission to learn from the current economic crisis. Everybody was non-committal to dismissive, Krugman saying sufficient discussions were already taking place. His slightly bashful dismissive was hard to read. Was he smirking about the wasteful, ineffectuality of the 9/11 Commission? Or does he really think there is nothing policy-wise to be learned from the current mess?

Soon enough the conversation veered towards a table response to this very desire to blame someone or something for our current problems. (Who needs a Commission?!) A consensus ar the table quickly emerged to make the point that 300 million people in America (and another 300 million in Europe, Krugman added) were all responsible for going on a “25 year credit spending spree,” saving little and spending beyond our means. Really? That’s the ultimate cause of the biggest global economic crash since the 1930s? We were all just maxing out our credit cards too much?

Now it’s not that I don’t think there shouldn’t be consequences for not paying your debts but didn’t congress already establish what many consider quite harsh, unforgiving bankruptcy laws in 2005? B/f the crash? And I’m not suggesting that people who took on mortgage debts they couldn’t pay shouldn’t be held responsible. But isn’t there a sense of proportion here we’re missing when pointing fingers at millions of working people for receiving 70 billion in subsidies while four or five banks will be lavished w/ up to 2.5 trillion? So why have people gone on a 25 year credit spending spree, anyway? Might it have anything to do w/ the fact that real working class wages have not risen since the 1970s?! (U.S. Bureau of Labor Statistics)

Wouldn’t it be far more accurate to say that this crisis is the result of 25 years of supply side economics that were supposed to trickle down to the rest of us but never did; that this crisis is the result of 25 years of “free market” deregulation and predatory casino capitalism fed consumer pipe dreams and Scroogy anti-labor demagoguery; that this crisis is the result of a 25 year surge in income inequality of staggering numbers not seen since the Gilded Age? (The Height of Inequality)

And wouldn’t it be important that this be said so that we might not repeat this catastrophe again? So that we might not have the same self-serving assholes that led us into this mess continue in their machinations from positions of power? The length and depth of capitalist cyclical downslides were significantly longer and deeper (during the Gilded Age) before the Depression precisely because of the sweeping government interventions and social safety net measures established by the FDR’s New Deal. It wasn’t just a bunch of government bailouts of failed industries. Now in the biggest free-fall since the Great Depression are we going to forget that?!

I’ve read it suggested that this cover-up recovery is b/c the Wall Streeters gave more money to Obama’s campaign, reportedly 10 million plus (CounterPunch), than any other constituency. But Obama amassed the biggest campaign funding war chest in history. Over 700 million or something like that. Why would 10 measly million buy so much influence? Please let this be the media chatter drama of the moment, the left’s unreconstructed doomy fatalism, the last bleats of the Right’s dying free market fundamentalist ideology, and Obama’s careful, patient, measured steps to right the ship of state. B/c this growth model, Wall Streeters hustle a bubble like mad, then go on bonus junkets to the Caribbean, while Main Streeters take it on the chin, chewing on their own pride in austerity and sacrifice, can’t last. Eventually some angry, smart young people will rally a mob to tear the whole thing apart. And it’ll be fun while it lasted for those who hit the jackpot. But there will be hell to pay for the rest of us.

Ending the Banker's Holiday: Part Two

“Politics are hard to predict,” Lawrence Summers
(aka “The Professor,” Obama’s Chief Economic Advisor)

So the first attempt by the Obama team to address the banking crisis last Tuesday was a bust. It didn’t even please Wall Street, who at this point would seem to be the only constituency being given any serious consideration. I was hoping for better but, knowing what they had to offer, Summers and Geithner could not anticipate this political reaction?! The closest to an actual “plan” was barely distinguishable from ideas floated by Henry Paulson and the Bush team last fall. And still hung-up on the same question: what price should the public pay for the “bad” assets amassed by the banks?

“Markets are a great way to organize economic activity,
but they need adult supervision.” –Wall Street Journal

Most distressing is the contrast between the Obama team’s dithering and what is emerging from smart Economists as a few obvious needed steps to be taken:

1) Quit the charade to—what?— fit some myth of private ownership that has always been a gross distortion of American history anyway. Nationalize the banks, even if only for a temporary period. It is an insult to taxpayers to pour hundreds of billions of public money into the private banks black hole, from 450 billion (Krugman) to 2.5 trillion (Reich), without any means to exercise control over how the banks spend that money. On the one hand, 18 billion paid in bonuses to bank managers since the meltdown is small potatoes; on the other, it is indicative of the fact that these people do not operate in the world where the rest of us live, where people actually have to work for a living, and is a flagrant slap in the face to the public bailout. These are NOT people we can trust to make Wall Street work for Main Street, duh.

2) Many agree that a crucial tipping point in our current predicament was the repeal of the Glass-Steagall Act in 1999. This Depression Era legislation set rules about the appropriate business of banks and established boundaries to avoid conflicts of interest in the financial sector. Its repeal— ratified by the Clinton-Rubin team, lest you’d like to blame all this on the Bushies—unleashed unsavory links between investment banks and junk money managers and fraudulent real estate mortgage companies. Prior to the repeal subprime mortgages constituted 5% of the real estate market; by 2006 the number had reached 30% (Wikipedia). Capitalism is by definition cyclical, alternating between bull runs and bear markets, but it’s the repeal of Glass-Steagall that has blown this most recent bubble to such gigantic, at this point still seemingly bottomless, toxic, world-wide proportions. (CounterPunch.)

3) The crux of this bubble trouble was the simple fact that Wall Streeters and their minions were making beaucoup dollars selling and reselling debt assets without any personal financial risk, without having to maintain any minimum of capital to debt ratio, let alone any responsibility for reporting these tenuous financial arrangements. The credit rating agencies whom should have cried foul failed miserably. Even though as early as ’03 Warren Buffett and a few other prominent members of the business community were calling unregulated derivatives markets “timebombs,” the Securities and Exchange Commission, our government watchdogs, did nothing. Perhaps the poor reception on Wall Street to the Obama team’s vague, tepid plan indicates that at this point even a majority of Wall Street has had enough of this insider’s game. How could we expect the Wall Street elite— including Geithner and Summers— to reform themselves? It’s time to clean house, closing the revolving door between Wall Street and Washington, establishing new independent government oversight that will reestablish rules that reward hard work and honesty. Isn’t this what Obama promised he’d do anyway? (Baseline Scenario.)

Steps 1 and 2 seem inevitable if it wasn’t for the dithering. But can they be carried out substantively without step 3? None of this should be surprising after watching Obama select as his economic advisors, one after another, from the Clinton team. A group as responsible as anybody for setting the stage for the current debacle. And, still, I want to hang on to something in Obama’s rhetoric. The stuff necessary to finally ending this second Gilded Age out of the simple, sober recognition— breaking with the supply-side, trickle-down delusions of the Reagan Revolution— that a healthy middle class is the most important investment for long-term economic growth.